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Gold (XAU/USD) Elliott Wave Update: Nearing a Critical Point
Hey there, let's take a close look at the recent price action in Gold, specifically through the lens of Elliott Wave Theory on the 2-hour chart. Your count suggests we're deep into a major corrective phase after the run-up we saw earlier this year.
The Completed Five-Wave Structure
First, confirming the top: Your analysis points out that the larger five-wave impulse (labeled in blue as ((i)-(v))) completed with red wave 5 topping out at the 4381 level back in October 2025. This marked the end of the major bullish trend and the start of a significant correction.
Phase 1: Corrective Red Wave A
The correction began immediately with a sharp drop, initiating Corrective Red Wave A.
Blue Wave (a): This was the first, sharp leg down, finding a temporary floor around 4004 on October 21st.
Blue Wave (b): Following this drop, the market entered a period of consolidation. The price action here formed a triangle pattern. This is a crucial observation! The triangle confirmed that the larger Red Wave A was a Flat correction (A-B-C) rather than a Zigzag, which typically has a much simpler B wave. This triangle pattern ended with the top of the blue wave (b) at 4138.
Blue Wave (c): After the triangle completed, we saw the final, sharp decline to finish Red Wave A. This leg had a clear five-wave structure (labeled in green), bottoming out at 3886. This completed the entire Red Wave A structure.
Phase 2: Corrective Red Wave B
The market then moved into the rebound phase, starting Corrective Red Wave B from the 3886 low.
- This rebound took the form of a clear A-B-C structure (labeled in blue as (a)-(b)-(c)).
- Blue Wave (c) aggressively pushed the price back up, eventually peaking at 4245. This is the point where the larger-degree Red Wave B is considered complete.
A key characteristic of a Flat correction is that the B wave often retraces a large portion of A, and in this case, it came very close to the start of A, which fits the pattern.
Phase 3: The Unfolding Red Wave C
Now for the present: We are currently in the final leg of the major correction, Red Wave C. Since 'C' waves in corrections are typically motive, we expect this move to unfold in a clear five-wave structure (blue waves (i) through (v)).
Blue Wave (i): The initial drop from the Red Wave B peak (4245) was a clear five-wave decline (green structure), confirming the start of the C wave.
Blue Wave (ii): We are currently in the counter-trend rebound of Blue Wave (ii). This is a corrective wave, and as you rightly point out, these can be notoriously tricky to predict in terms of exact structure and end-point. While it has met the minimum criteria for completion, it certainly has the potential to extend further, possibly reaching the 4200+ area before turning over.
Trader's Insight: Corrective waves like (ii) often frustrate traders because they lack the clear momentum of an impulse. Patience is key here.
The Bearish Target Ahead
Once this Blue Wave (ii) finally completes, the main event will be the powerful, third leg down: Blue Wave (iii).
- Expected Move: The third wave is often the longest and most aggressive in an impulse sequence. Based on the overall bearish count, we anticipate a sharp decline that should easily take the price through the Red Wave A low (3886).
- Primary Target: The area of 3800 or even lower is the logical target to complete the full Red Wave C structure.
Current Trading Recommendation & Invalidation
Until Blue Wave (ii) clearly resolves, trying to short can expose you to unnecessary risk if the wave extends higher toward 4200 or beyond. The best risk/reward setup will be when blue wave (ii) shows clear signs of completion and a turn lower, offering a high-probability entry for the anticipated Blue Wave (iii) move.
The Invalidation Point: A break above the 4250 level would invalidate the current bearish wave count. If this happens, it would suggest the previous Red Wave B high (4245) was breached, requiring a complete recount of the short-term structure. However, the overarching, larger-degree picture remains bearish unless significantly higher highs are breached.
In summary: We're waiting for the current corrective bounce blue (ii) to end. Once it does, the stage is set for a substantial drop in Blue Wave (iii) toward the 3800 region, completing the entire major correction.
Wisdom from Past
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
Crucial Risk Management Advice
Crucial Advice: Effective trading is based on disciplined risk management, not prediction certainty. Always use a firm stop-loss to protect your capital. Macroeconomic news, particularly from the Federal Reserve or the European Central Bank, can override any technical pattern instantly.
About the Author
Ghulam Muhiuddin, Certified Technical Market Analyst
Experience: This analysis reflects the insights gained from 18 Years of consistent market analysis and forecasting, specializing in the application of the Elliott Wave Principle and advanced technical structures.
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